WWE® Reports 2012 First Quarter Results

May 03, 2012 08:30 AM Eastern Daylight Time

STAMFORD, Conn.--(BUSINESS WIRE)--WWE (NYSE:WWE) today announced financial results for its first quarter
ended March 31, 2012. Revenues totaled $123.1 million as compared to
$119.9 million in the prior year quarter. Operating income was $16.0
million as compared to $13.2 million in the prior year quarter. Net
income was $15.3 million, or $0.20 per share, as compared to $8.6
million, or $0.11 per share, in the prior year quarter. There were
several items that impacted comparability on a year-over-year basis,
including expenses incurred in conjunction with our potential network,
recognition of previously unrecognized tax benefits and film
impairments. Excluding the impact of these items, Adjusted Operating
income in the current quarter was $18.9 million and Adjusted Net income
was $13.1 million, or $0.18 per share. In the prior year quarter,
Adjusted Operating income was $16.0 million and Adjusted Net income was
$10.3 million, or $0.14 per share.

“In the first quarter, EBITDA grew 19%, reflecting increased profits
across all our businesses. Our results were highlighted by the strong
performance of our live events as we entered a new market in the Middle
East. We are very pleased that our positive first quarter execution
continued in April with the successful staging of WrestleMania,
which is expected to deliver nearly 1.3 million pay-per-view buys
globally,” stated Vince McMahon, Chairman and Chief Executive Officer.
“Through the first quarter, we made important progress on our key
strategic initiatives, developing our foundation for creating and
distributing new content, and building on our tremendous brand strength,
especially in social media. Looking ahead, we are confident that we will
leverage the broad appeal of our content to transform our business and
drive long-term earnings growth.”

Comparability of Results

Our current year quarter results included a $0.8 million film impairment
charge, related to our film, Bending the Rules, $2.1 million in
network related operating expenses and a $4.1 million benefit due to
previously unrecognized tax benefits. Prior year quarter results
included impairment charges of $2.8 million, related to our film 12
Rounds,and a$0.1 million tax benefit. In order to
facilitate an analysis of our financial results on a more comparable
basis, where noted, we have adjusted our results to exclude these items
from our first quarter of 2012 results. (See Schedules of Adjustments in
Supplemental Information).

First Quarter Results by Region and Business
Segment

Revenues from North America increased 4%, led by the performance of our
Live and Televised Entertainment segment. Revenues from outside North
America were essentially unchanged from the prior year quarter. There
was no significant impact from changes in foreign exchange rates in the
current year quarter.

The following tables reflect net revenues by region and by business
segment for the three months ended March 31, 2012 and March 31, 2011.
(Dollars in millions)

Three Months Ended

Net Revenues by Region

March 31,2012

March 31,2011

North America

$

93.0

$

89.7

Europe, Middle East & Africa (EMEA)

18.0

16.9

Asia Pacific (APAC)

8.5

8.4

Latin America

3.6

4.9

Total

$

123.1

$

119.9

Three Months Ended

Net Revenues by Business Segment

March 31,2012

March 31,2011

Live and Televised Entertainment

$

75.7

$

70.4

Consumer Products

35.5

34.8

Digital Media

7.1

6.1

WWE Studios

4.8

8.6

Total

$

123.1

$

119.9

Live and Televised Entertainment

Revenues from our Live and Televised Entertainment businesses increased
8% to $75.7 million as compared to $70.4 million in the prior year
quarter. The increase was primarily due to the performance of our live
events and additional television rights fees, as described below.

Live Event revenues increased 13% to $22.2 million from $19.6
million in the prior year quarter primarily due to the timing of our
Fan Axxess events and the successful performance of our inaugural tour
in Abu Dhabi. Fan Axxess was held in conjunction with WrestleManiaXXVIII but occurred within our first quarter.

There were 75 total events during the current quarter as compared
to 77 events in the prior year quarter, with the variance
primarily due to touring logistics. There were six international
events performed in the current quarter as compared to four in the
prior year quarter.

North American events generated $18.9 million of revenues from 69
events as compared to $17.4 million from 73 events in the prior
year quarter, reflecting the timing of Fan Axxess, which added
$1.4 million in incremental revenue to the quarter with $1.6
million in the current year quarter. A 6% increase in average
ticket prices to $38.50 for our North American events was offset
by the impact of four fewer events in the quarter and a 3% decline
in average attendance to 6,200.

International events generated approximately $3.3 million of
revenues from six events as compared to $2.2 million from four
events in the prior year quarter. The growth was led by the impact
of our strong tour in Abu Dhabi, which attracted a total of more
than 15,000 fans at three events with an average price of $147 per
ticket. Accordingly, average ticket prices at our international
events increased 157% to $125.60 as compared to $48.88 in the
prior year quarter. Average attendance at our international
events, however, fell 60% to 3,400 reflecting the performance of
our tour in Central America, which was staged in more economically
challenged areas of that region than in the prior year quarter.
For these events, our International revenue included the effect of
minimum guarantees, which we negotiate to protect our interests
when traveling to territories with higher economic risks. These
guarantees partially offset the impact of lower average attendance.

Pay-Per-View revenues were $13.5 million in both the current
and prior year quarter, as a 3% increase in the average revenue per
buy was offset by a comparable decline in current year buys. The
increase in average revenue per buy was attributable to higher retail
prices charged for viewing our events in high definition. The decline
in buys for the two events in the quarter was driven by an 8% decline
in international buys as domestic buys remain essentially unchanged.

The details for the number of buys (in 000s) are as follows:

Broadcast Month

Events (in chronological order)

Three Months Ended March 31,

2012

2011

January

Royal Rumble®

443

446

February

Elimination Chamber™

178

199

Prior events

64

45

Total

685

690

Television Rights Fees revenues were $32.5 million as compared
to $31.6 million in the prior year quarter. The rise was primarily due
to additional rights fees and contractual increases from our existing
programs, partially offset by the absence of rights fees for our WWE
Superstars program.

Venue Merchandiserevenues were $5.1 million as compared
to $4.5 million in the prior year quarter, as the favorable impact
associated with the timing of our Fan Axxess events was partially
offset by a 13% decrease in total domestic attendance in the current
year quarter.

WWE Classics on Demand™ revenues were$1.0 million as
compared to $1.1 million in the prior year quarter.

Consumer Products

Revenues from our Consumer Products businesses increased 2%, to $35.5
million from $34.8 million in the prior year quarter, primarily due to
increased revenue in our Home Video business, partially offset by a
decline in our Magazine Publishing business.

Home Video net revenues were $9.2 million as compared to $8.1
million in the prior year quarter, representing a 14% increase that
was primarily due to higher than anticipated sell-through rates for
releases in prior periods. The resulting increase in sales was
partially offset by a 27% decline in average price and a 5% decrease
in units shipped, where these factors stemmed from ongoing discounts
and promotional activity primarily related to our catalog titles.
Additionally, there was one fewer title released in the current year
quarter.

Licensing revenues were $24.2 million as compared to $23.9
million in the prior year quarter, as the recognition of minimum
guarantees was offset by a decline in royalties earned from several
product categories, including video games and toys. The decline in
these categories was primarily due to difficult trends in our
international markets. Overall revenue from the sale of video games
declined 11%, or $1.5 million, while revenue from the sale of toys
declined 6% or $0.4 million. Shipments of our franchise video game, WWE
’12, declined 25% to 2.0 million units, driven by a reduction in
the number of platforms supported by the current release and
reflecting broader industry challenges.

Magazine Publishing net revenues were $1.4 million as compared
to $2.2 million in the prior year quarter, reflecting lower newsstand
sales in the current quarter.

Digital Media

Revenues from our Digital Media related businesses were $7.1 million as
compared to $6.1 million in the prior year quarter, representing a 16%
increase.

WWE.com revenues increased to $3.9 million as compared to $2.7
million in the prior year quarter, primarily due to increased rights
fees and higher online advertising sales. The increase in rights fees
was driven by a new programming agreement, which licenses original,
short-form content to YouTube.

WWEShop revenues of $3.2 million were essentially unchanged
from the prior year quarter as an 18% increase in the average revenue
per order to $48.04 was offset by a 20% decrease in the sales volume
to approximately 66,000 orders. Discounted sales and promotional
activity accounted for the relatively lower price and higher sales
volume in the prior year quarter.

WWE Studios

During the quarter, WWE Studios recognized revenue of $4.8 million as
compared to $8.6 million in the prior year, reflecting the relative
performance and timing of releases from our movie portfolio. In the
prior year quarter, we released The Chaperone. In the current
quarter, we released Bending the Rules, which has generated lower
than anticipated home video receipts in its initial weeks of release. As
a result, we revised our long-term ultimate projections for this film
and recorded an impairment charge of $0.8 million contributing to an
overall WWE Studios loss of $1.0 million in the current year quarter.
This result compared to a loss of $3.6 million in the prior year quarter
driven by the $2.8 million impairment for our film 12 Rounds.

Profit Contribution (Net revenues less cost of
revenues)

Profit contribution increased 17% to $54.7 million reflecting better
results across all of our businesses. Reduced losses from our movie
business, improved sell-through rates in home video, and incremental
rights fees for our online programming content contributed to the
expansion in profit and overall profitability. Gross contribution
margins increased to 44% from 39% in the prior year quarter. Excluding
the impact of film impairments, Adjusted Profit contribution increased
12% to $55.5 million and Adjusted Profit contribution margin increased
to 45% from 41% in the prior year quarter.

Selling, general and administrative expenses

SG&A expenses were $34.7 million for the current quarter as compared to
$29.9 million in the prior year quarter reflecting increased staffing
costs, a $1.4 million rise in bad debt expense and to a lesser extent an
increase in legal and professional fees. The increase in staffing costs
was incurred primarily to support our content and distribution
initiatives. Total network-related costs reached approximately $2.1
million in the current year quarter. Excluding these network expenses,
adjusted SG&A expenses increased 9% to $32.6 million from the prior year
quarter.

Depreciation and amortization

Depreciation and amortization expense was $4.0 million for the current
quarter as compared to $3.6 million in the prior year quarter.

EBITDA

EBITDA increased 19% to $20.0 million from $16.8 million in the prior
year quarter. The increase was primarily due to the expansion in profit
contribution across our businesses, partially offset by the increase in
SG&A expenses as described above. Excluding the impact of network
related expenses and film impairments in both the current and prior year
quarter, Adjusted EBITDA increased 17% to $22.9 million as compared to
$19.6 million in the prior year quarter.

Investment, Interest and Other Income

Investment income of $0.5 million was unchanged from the prior year
quarter. Other income and expense was essentially flat to the prior year
quarter as benefits from changes in certain state taxes were offset by
interest expense related to our revolving credit facility.

Effective tax rate

In the current year quarter, the effective tax rate was 7% as compared
to 37% in the prior year quarter. The decrease in tax rate from our
anticipated rate of 35% was primarily due to the recognition of a $4.1
million benefit relating to previously unrecognized tax benefits. The
prior year rate was also impacted by a $0.1 million unrecognized tax
benefit.

Cash Flows

Net cash provided by operating activities was $27.2 million for the
three months ended March 31, 2012 as compared to $28.9 million in the
prior year quarter. Improved current year operating performance was
offset by an increase in television production spending and other
changes in working capital.

Purchases of property and equipment increased $5.6 million from the
prior year quarter, primarily due to a $6.4 million investment in assets
to support our efforts to create and distribute new content, including
through a potential network. Partially offsetting the increase was a
$1.6 million purchase of music rights in the prior year quarter.

Additional Information

Additional business metrics are made available to investors on a monthly
basis on our corporate website – corporate.wwe.com.

Note: WWE will host a conference call on
May 3, 2012 at 11:00 a.m. ET to discuss the Company’s earnings results
for the first quarter of 2012. All interested parties can access the
conference call by dialing 855-993-1400 (conference ID: WWE). Please
reserve a line 15 minutes prior to the start time of the conference
call. A presentation that will be referenced during the call can be
found at the Company web site at corporate.wwe.com.
A replay of the call will be available approximately three hours after
the conference call concludes, and can be accessed at corporate.wwe.com.

WWE,
a publicly traded company (NYSE: WWE), is an integrated media
organization and recognized leader in global entertainment. The company
consists of a portfolio of businesses that create and deliver original
content 52 weeks a year to a global audience. WWE is committed to family
friendly entertainment on its television programming, pay-per-view,
digital media and publishing platforms. WWE programming is broadcast in
more than 145 countries and 30 languages and reaches more than 600
million homes worldwide. The company is headquartered in Stamford,
Conn., with offices in New York, Los Angeles, Miami, London, Mumbai,
Shanghai, Singapore, Istanbul and Tokyo.

Additional information on WWE (NYSE: WWE) can be found at wwe.com and
corporate.wwe.com. For information on our global activities, go to http://www.wwe.com/worldwide/.

Trademarks: All WWE programming, talent
names, images, likenesses, slogans, wrestling moves, trademarks, logos
and copyrights are the exclusive property of WWE and its subsidiaries.
All other trademarks, logos and copyrights are the property of their
respective owners.

Forward-Looking Statements: This press
release contains forward-looking statements pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995, which are
subject to various risks and uncertainties. These risks and
uncertainties include, without limitation, risks relating to maintaining
and renewing key agreements, including television and pay-per-view
programming distribution agreements; the need for continually developing
creative and entertaining programming; the continued importance of key
performers and the services of Vincent McMahon; the conditions of the
markets in which we compete and acceptance of the Company's brands,
media and merchandise within those markets; our exposure to bad debt
risk; uncertainties relating to regulatory and litigation matters; risks
resulting from the highly competitive nature of our markets;
uncertainties associated with international markets; the importance of
protecting our intellectual property and complying with the intellectual
property rights of others; risks associated with producing and
travelling to and from our large live events, both domestically and
internationally; the risk of accidents or injuries during our physically
demanding events; risks relating to our film business; risks relating to
increasing content production for distribution on various platforms,
including the potential creation of a WWE Network; risks relating to our
computer systems and online operations; risks relating to the large
number of shares of common stock controlled by members of the McMahon
family and the possibility of the sale of their stock by the McMahons or
the perception of the possibility of such sales; the relatively small
public float of our stock; and other risks and factors set forth from
time to time in Company filings with the Securities and Exchange
Commission. Actual results could differ materially from those currently
expected or anticipated. In addition, our dividend is dependent on a
number of factors, including, among other things, our liquidity and
historical and projected cash flow, strategic plan (including
alternative uses of capital), our financial results and condition,
contractual and legal restrictions on the payment of dividends, general
economic and competitive conditions and such other factors as our Board
of Directors may consider relevant.

WWE

Consolidated Income Statements

(In thousands, except per share data)

(Unaudited)

ThreeMonths EndedMarch 31, 2012

ThreeMonths EndedMarch 31, 2011

Net revenues

$

123,068

$

119,907

Cost of revenues

68,397

73,247

Selling, general and administrative expenses

34,712

29,859

Depreciation and amortization

3,918

3,635

Operating income

16,041

13,166

Investment income, net

499

457

Interest expense

(502

)

(50

)

Other income, net

506

60

Income before income taxes

16,544

13,633

Provision for income taxes

1,213

5,030

Net income

$

15,331

$

8,603

Earnings per share:

Basic

$

0.21

$

0.11

Diluted

$

0.20

$

0.11

Weighted average common shares outstanding:

Basic

74,461

75,043

Diluted

74,815

75,727

WWE

Consolidated Balance Sheets

(In thousands)

(Unaudited)

As ofMarch 31,2012

As ofDecember 31,2011

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

60,469

$

52,491

Short-term investments, net

105,450

103,270

Accounts receivable, net

50,123

56,741

Inventory

1,567

1,658

Deferred income tax assets

12,547

11,122

Prepaid expenses and other current assets

15,095

14,461

Total current assets

$

245,251

$

239,743

PROPERTY AND EQUIPMENT, NET

102,004

96,562

FEATURE FILM PRODUCTION ASSETS, NET

19,840

23,591

TELEVISION PRODUCTION ASSETS

3,310

251

INVESTMENT SECURITIES, NET

9,983

10,156

OTHER ASSETS

8,340

8,321

TOTAL ASSETS

$

388,728

$

378,624

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt

$

1,314

$

1,262

Accounts payable and accrued expenses

46,338

46,283

Deferred income

26,709

21,709

Total current liabilities

74,361

69,254

LONG-TERM DEBT

-

359

NON-CURRENT INCOME TAX LIABILITIES

3,677

5,634

NON-CURRENT DEFERRED INCOME

7,823

8,234

STOCKHOLDERS' EQUITY:

Class A common stock

286

283

Class B common stock

459

462

Additional paid-in capital

339,537

338,414

Accumulated other comprehensive income

3,531

3,262

Accumulated deficit

(40,946

)

(47,278

)

Total stockholders' equity

302,867

295,143

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

388,728

$

378,624

WWE

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

ThreeMonths EndedMarch 31,2012

ThreeMonths EndedMarch 31,2011

OPERATING ACTIVITIES:

Net income

$

15,331

$

8,603

Adjustments to reconcile net income to net cash provided by

operating activities:

Amortization and impairments of feature film production assets

4,559

9,212

Depreciation and amortization

3,918

3,635

Amortization of bond premium

571

625

Amortization of debt issuance costs

154

-

Stock compensation costs

740

1,054

Provision (recovery) of accounts receivable write-offs

835

(577

)

Loss on disposal of property and equipment

110

-

Benefit from deferred income taxes

(2,477

)

(1,653

)

Excess tax benefit from stock-based payment arrangements

(6

)

(32

)

Changes in assets and liabilities:

Accounts receivable

6,424

3,750

Inventory

91

84

Prepaid expenses and other current assets

(3,401

)

(571

)

Feature film production assets

(600

)

(3,118

)

Television production assets

(3,059

)

-

Accounts payable and accrued expenses

(620

)

12,372

Deferred income

4,588

(4,517

)

Net cash provided by operating activities

27,158

28,867

INVESTING ACTIVITIES:

Purchase of property and equipment and other assets

(8,014

)

(4,116

)

Purchases of short-term investments

(7,821

)

(20,893

)

Proceeds from maturities of investments

5,500

15,177

Net cash used in investing activities

(10,335

)

(9,832

)

FINANCING ACTIVITIES:

Repayments of long-term debt

(306

)

(284

)

Dividends paid

(8,937

)

(21,062

)

Issuance of stock, net

392

459

Excess tax benefit from stock-based payment arrangements

6

32

Net cash used in financing activities

(8,845

)

(20,855

)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

7,978

(1,820

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

52,491

69,823

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

60,469

$

68,003

NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Non-cash purchase of property and equipment

$

1,402

$

-

WWE

Supplemental Information – EBITDA

(In thousands)

(Unaudited)

ThreeMonths EndedMarch 31, 2012

ThreeMonths EndedMarch 31, 2011

Net income reported on U.S. GAAP basis

$

15,331

$

8,603

Provision for income taxes

1,213

5,030

Investment, interest and other expense (income), net

(503

)

(467

)

Depreciation and amortization

3,918

3,635

EBITDA

$

19,959

$

16,801

Non-GAAP Measure:

EBITDA is defined as net income before investment, interest and other
expense/income, income taxes, depreciation and amortization. The
Company’s definition of EBITDA does not adjust its U.S. GAAP basis
earnings for the amortization of Feature Film production assets.
Although it is not a recognized measure of performance under U.S. GAAP,
EBITDA is presented because it is a widely accepted financial indicator
of a company’s performance. The Company uses EBITDA to measure its own
performance and to set goals for operating managers. EBITDA should not
be considered as an alternative to net income, cash flows from
operations or any other indicator of WWE’s performance or liquidity,
determined in accordance with U.S. GAAP.

WWE

Supplemental Information – Schedule of Adjustments

(In millions)

(Unaudited)

Three Months Ended

March 31,2012

March 31,2011

Profit contribution

$

54.7

$

46.7

Adjustments (Added back):

Film impairment charge

0.8

2.8

Adjusted Profit contribution

$

55.5

$

49.5

Selling, general and administrative expenses

34.7

29.9

Adjustments (Added back):

Network related expenses

(2.1

)

-

Adjusted Selling, general and administrative expenses

32.6

29.9

Depreciation and amortization

4.0

3.6

Operating income

$

16.0

$

13.2

Adjusted Operating income

$

18.9

$

16.0

EBITDA

$

20.0

$

16.8

Adjusted EBITDA

$

22.9

$

19.6

Non-GAAP Measure:

Adjusted Profit contribution, Adjusted Selling, general and
administrative expenses, Adjusted Operating income and Adjusted EBITDA
exclude certain material items, which otherwise would impact the
comparability of results between periods. These should not be considered
as an alternative to net income, cash flows from operations or any other
indicator of WWE’s performance or liquidity, determined in accordance
with U.S. GAAP.

WWE

Supplemental Information – Schedule of Adjustments

(In millions, except per share data)

(Unaudited)

Three Months Ended

March 31,

March 31,

2012

2011

Operating income

$

16.0

$

13.2

Adjustments (Added back):

Film impairment charge

0.8

2.8

Network related expenses

2.1

-

Adjusted Operating income

$

18.9

$

16.0

Investment, interest and other (expense) income, net

0.5

0.4

Adjusted Income before taxes

$

19.4

$

16.4

Provision for taxes

(1.2

)

(5.0

)

Adjustments (Added back):

Previously unrecognized tax benefits

(4.1

)

(0.1

)

Change due to operating adjustments

(1.0

)

(1.0

)

Adjusted Provision for taxes

(6.3

)

(6.1

)

Adjusted Net income

$

13.1

$

10.3

Adjusted Earnings per share:

Basic

$

0.18

$

0.14

Diluted

$

0.18

$

0.14

Weighted average common shares outstanding:

Basic

74,461

75,043

Diluted

74,815

75,727

Non-GAAP Measure:

Adjusted Operating income, Adjusted Income before taxes, Adjusted
Provision for taxes, Adjusted Net income and Adjusted Earnings per share
exclude certain material items, which otherwise would impact the
comparability of results between periods. These should not be considered
as an alternative to net income, cash flows from operations or any other
indicator of WWE’s performance or liquidity, determined in accordance
with U.S. GAAP.

WWE

Supplemental Information- Free Cash Flow

(In thousands)

(Unaudited)

ThreeMonths EndedMarch 31, 2012

ThreeMonths EndedMarch 31, 2011

Net cash provided by operating activities

$

27,158

$ 28,867

Less cash used in:

Purchase of property and equipment

(8,007

)

(2,433

)

Purchase of other assets

(7

)

(1,683

)

Free Cash Flow

$

19,144

$ 24,751

Non-GAAP Measure:

We define Free Cash Flow as net cash provided by operating activities
less cash used for the purchase of property, equipment and other assets.
Although it is not a recognized measure of liquidity under U.S. GAAP,
Free Cash Flow provides useful information regarding the amount of cash
our continuing business is generating after expenditures for capital and
other assets, and that is available for reinvesting in the business and
for payment of dividends.